Posts by Benn McGrady

Benn McGrady, Ph.D., directs the Initiative on Trade, Investment and Health at the O'Neill Institute for National and Global Health Law, Georgetown University Law Center. Benn is the author of Trade and Public Health: The WTO, Tobacco, Alcohol and Diet (Cambridge University Press, 2011). Benn is also an Adjunct Professor at the Georgetown University Law Center, where he teaches International Trade and Health and co-teaches Public Health and International Investment Law.

For those of you still following this blog (I have been slack of late, I know), I will no longing be blogging on this site. Today is my last day with the O’Neill Institute. Later in the month I will join the World Health Organization in Geneva, where I will be working on prevention of non-communicable diseases. I encourage you to follow the general O’Neill Institute blog in place of this one.

Over the past two years, I have been collaborating with the American Cancer Society on research projects in Brazil and the Philippines. I mentioned the report on the Philippines here. The Brazil report, which was also developed in collaboration with the Centro de Estudos sobre Tabaco e Saúde at FIOCRUZ, is now available here in English and Portuguese.

The report examines the following five issues (1) opportunities and challenges for Brazil’s national coordinating mechanism on implementation of the WHO Framework Convention on Tobacco Control, (2) implications of new trade agreements for tobacco control in Brazil, (3) investment and fiscal incentives in the Brazilian tobacco sector, (4) the effects of the WHO Framework Convention on Brazilian regulation and vice-versa, and (5) questions of institutional design for health regulatory agencies.

I have not had a chance to read it yet, but the US State Department has released a public version of the award in the investment treaty claim Apotex v United States. The claim concerned an import alert issued by the Food and Drug Administration with respect to products manufactured by Apotex in Canada.

Investment Arbitration Reporter has some initial coverage of the award (behind a paywall). I plan to take a good look at the award in the coming weeks. In the meantime, I would merely note that the Apotex claim joins the recent Achmea claim noted here, that also failed. These are just two of a number of recent claims concerning health issues.

Over at the International Economic Law and Policy Blog, Simon Lester has a post about the recent Inside US Trade story that the USTR might propose to carve tobacco out of the investment chapter of the Trans Pacific Partnership.

Although I have issues with a blanket policy of carving tobacco out of trade agreements, I have argued in the past that tobacco should be carved out of investment treaties. Put simply, if reducing tobacco consumption is a good thing as a matter of public policy, it is bad policy to provide incentives for investment in tobacco production (including through investment treaties).

I also disagree with Simon on a few specific points.

First, Simon argues that excluding tobacco from the investment chapter “means that a TPP nation could expropriate a tobacco factory without providing compensation”. To be more accurate, excluding tobacco means that the foreign investor would not be able to seek recourse under the TPP for this action and would instead have to rely on domestic law (or another applicable international law). Investment treaties like the TPP are not the sole source of legal rights for foreign investors. Ordinarily, investment treaties add to existing rights.

Second, Simon argues that with tobacco excluded from the investment chapter a TPP party “could tax foreign-owned tobacco companies at a rate higher than it taxes domestically-owned ones.” This ignores the fact that a party would still be subject to obligations concerning non-discrimination under the law of the World Trade Organization, possibly under other chapters of the TPP and possibly under domestic law (depending on the country in question).

Third, although Simon is correct that excluding tobacco from the TPP could have adverse effects on interpretation of other investment treaties, this risk can be (and should be) addressed in drafting. The purpose here is to avoid creating incentives for tobacco production and to avoid giving tobacco companies additional legal rights that are subject to abuse.

Finally, I agree with Simon that fixing investment treaties as a whole should be the primary priority. However, this is not mutually exclusive with excluding tobacco from the TPP investment chapter.

The risk of ‘regulatory chill’ has been one of the significant points of discussion over the past few years concerning public health and investment treaty claims. The Philip Morris International claim against Uruguay has been cited as a case in point, with a large multinational corporation bringing an investment treaty claim against a small country with limited resources to defend such claims. In its Request for Arbitration, Philip Morris did not specify the amount of compensation it was seeking from Uruguay. Nonetheless, we saw numerous vague references in the media to the claim being for “billions of dollars”. Now that the merits phase of the claim is proceeding, Philip Morris has clarified here that it is seeking USD $25 million.

I do not intend to downplay a claim for $25 million, which is a significant sum of money, but there is a great disparity between that and a claim for “billions”. Even if Philip Morris was not the source of the suggestion that the claim was for billions, the company could have corrected the record. The failure to do so tends to support the argument that the company is using the claim to discourage tobacco regulation more broadly.

For those in DC on June 17, the American Society of International Law will host a panel on individual and collective rights in the context of investment treaty arbitration. Although the panel is not dedicated to health issues specifically, they are certain to come up. Details are available here.

For those not in DC, check back at the above link over the coming days to see if the panel will be webcast.

Slovakia is in the process of moving towards a ‘single payer’ health insurance system in which the state will take the exclusive responsibility for providing health insurance. The transition to this model of universal health coverage has generated an important investment treaty dispute in the form of a claim made by Achmea, a Dutch company offering health insurance in the Slovakian market.

Achmea brought a claim under the Netherlands – Slovakia bilateral investment treaty. As discussed here, the claim is unusual in that Achmea sought an order for non-pecuniary relief that would prevent Slovakia from expropriating the company’s investment in that country. As reported here and here, the tribunal has ruled that it does not have jurisdiction to hear the claim. Although the decision has not been made public, it is being reported that the tribunal reasoned that it did not have jurisdiction to intervene in the democratic process underway in Slovakia.

Of course, whether Slovakia will be liable to compensate Achmea for expropriation after introducing the single payer system remains an open question. The importance of this decision lies in the conclusion that the tribunal does not have the authority to prevent implementation of the system.

Although this blog focuses on the legal constraints trade and investment agreements impose on health regulation, occasionally we see the controversial claim made that trade rules improve regulation. There is little in the way of empirical confirmation of this claim, so I thought it worth posting a new report on the political economy of tobacco control in the Philippines.

Readers of this blog may be familiar with Philippines – Distilled Spirits, a WTO dispute in which the Philippines was found to have in place a tax structure that discriminated in favor of domestic alcohol producers. The Philippines was ordered to bring its laws into compliance with WTO law, which required reform of the domestic alcohol tax structure. As the linked report suggests, this helped provide the political space for a broader reform of ‘sin taxes’ in the Philippines. The end result was a dramatic increase in tobacco taxes that are being used to fund expansion of a national health insurance scheme.

The conditions under which this outcome occurred may not be easily replicable in other countries. Nonetheless, the study does provide empirical confirmation of the claim that WTO law can improve regulation from a public health perspective.

With Anne Marie Thow, I have co-authored a short policy paper on the implications of international investment law for public health nutrition. The primary point of the paper is that governments have not undertaken sufficient work to think through the implications of international investment law for public health nutrition. On the one hand, governments seek to promote investment in the food chain to enhance food security. On the other hand, governments are increasingly taking downstream steps to regulate the products of that investment in the name of public health. This creates a risk of liability under international investment agreements, particularly where governments induce foreign investment. The abstract is as follows:

Philip Morris has recently brought claims against Australia (2011) and Uruguay (2010) under international investment agreements (IIAs). The claims allege that Philip Morris is entitled to compensation following the introduction of innovative tobacco packaging regulations to reduce smoking and prevent noncommunicable diseases (NCDs). Since tobacco control measures are often viewed as a model for public health nutrition measures, the claims raise the question of how investment law governs the latter. This paper begins to answer this question and to explain how governments can proactively protect policy space for public health nutrition in an era of expanding IIAs. The authors first consider the main interventions proposed to reduce diet-related NCDs and their intersection with investment in the food supply chain. They then review the nature of investment regimes and relevant case law and examine ways to maximize policy space for public health nutrition intervention within this legal context. As foreign investment increases across the food-chain and more global recommendations discouraging the consumption of unhealthful products are issued, investment law will increase in importance as part of the legal architecture governing the food supply. The implications of investment law for public health nutrition measures depend on various factors: the measures themselves, the terms of the applicable agreements, the conditions surrounding the foreign investment and the policies governing agricultural support. This analysis suggests that governments should adopt proactive measures – e.g. the clarification of terms and reliance on exceptions – to manage investment and protect their regulatory autonomy with respect to public health nutrition.

Simon Lester is convening an event at the Cato Institute on January 16 that may be of interest to readers in the Washington area. The event is titled “Patents, Public Health, and International Law: The Eli Lilly NAFTA Chapter 11 Case”. Details are available here.

It seems that claims relating to pharmaceutical products are becoming more common under investment treaties. Poland lost a recent claim concerning regulatory approval processes (a redacted copy of the award is available here); the US is facing a claim from Apotex Inc also concerning regulatory approval processes; and now Canada faces a claim from Eli Lilly concerning invalidation of pharmaceutical patents. There are also parallels here with the Philip Morris claims against Australia and Uruguay (although these concern trademark protection). Anyway, the event promises to be an interesting discussion and airing of different views.

The views reflected in this blog are those of the individual authors and do not necessarily represent those of the O’Neill Institute for National and Global Health Law or Georgetown University. This blog is solely informational in nature, and not intended as a substitute for competent legal advice from a licensed and retained attorney in your state or country.